It is common for banks and other financial institutions to place holds on checks when presented for deposit by customers, to allow sufficient time for the checks to clear at the paying bank. While such holds are typically for a short, fixed period of time (e.g., a few business days), in some cases a depository bank (the payee's bank) may require a longer hold, such as for a new customer or a customer without good credit. While such banking practices may be prudent to reduce the risk from bad or fraudulent checks, they lead to frustration when customers are not able to use the funds until the hold expires.
Usually, the release of funds for held checks is based on the period of the hold rather that the actual clearing of the check and transfer of funds from the paying bank to the depository bank. In some instances, the check may clear and be paid quickly to the depository bank, but since the hold is for a fixed period of time, the paid funds are not made available to the customer. Typically, the depository bank only knows the actual status of the check if it is returned with an insufficient funds or similar notice from the paying bank. Otherwise, it is assumed to have cleared after a specified period from the time of presentment (to the paying bank). Thus, in some cases where a check has cleared, the depository bank may have the funds from the paid check for several days before funds are attributed to and made available to the customer.